Power rate hikes will have limited impact: Yuanta

By Kevin Chen / Staff reporter

Most companies in the industrial, manufacturing and consumer sectors will see limited impact from the government’s plan to raise electricity rates from next month, Yuanta Securities Co (元大證券) said yesterday.

Economists believe the electricity rate hikes will affect more manufacturers in non-tech industries, such as cement, steel and industrial automation, but Yuanta researchers said the impact would largely be restricted to those in the steel sector.

“We believe there is limited impact to most names as a result of companies’ production bases having shifted overseas and some of them having set up their own power-generation facilities,” Yuanta researchers led by Bonnie Chang (張文慧) said in a report.

The potential impact from the electricity rate hikes could also be mitigated because there is a high possibility that companies in some oligopolistic industries might want to pass on the cost hike to customers, they said.

Starting from Oct. 1, the government will raise electricity rates by an average of 9 or 10 percent for industrial use and 3 or 4 percent for households, according to plans announced by the state-run Taiwan Power Co (Taipower, 台電) last month.

The upcoming rate hikes are phase two of the planned three-phase electricity rate increases, announced in May last year.

“Many high power consumption manufacturers, like textile and auto, have already moved their production bases to overseas markets, such as the China and Southeast Asia regions,” Yuanta researchers said.

In addition, on the back of government investment incentives, some manufacturers have established generation facilities, which has not only allowed these companies to have sufficient power themselves, but also to sell excessive electricity to external customers, including Taipower.

Yuanta said such companies should be viewed as beneficiaries of the electricity rate hikes, rather than victims.

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